Scott Malone

Throughout 2009, United Technologies Corp Chief Executive Louis Chenevert's mantra was that the diversified U.S. manufacturer was a "willing buyer" with a $2 billion takeover budget and that all it needed was to find a "willing seller."

Its deal last week to buy General Electric Co's security business for $1.82 billion answered the question of what the world's largest maker of elevators and air conditioners was going to do with its M&A budget.

But one question was left unanswered -- what of Textron Inc's Bell helicopter unit? An executive at United Tech's Sikorsky arm in March said that a merger with Bell was an "interesting hypothesis."

Textron never commented on the idea.

Shareholders may have gotten their answer to that question on Wednesday.

"There aren't many helicopter manufacturers out there and the ones that are out there aren't selling," Greg Hayes, United Tech's chief financial officer, told investors, when asked about where the Hartford, Connecticut-based company would be focusing its M&A energy.

Once United Tech closes its takeover of GE's security arm -- which will be its biggest deal since 2005, when it bought Kidde -- the company is probably "pretty much done" making big buys in that sector.

It remains interested, however, in smaller, so-called "bolt-on" deals in security, as well as control makers in the heating, ventilation and air conditioning area.

The security deal represented something of an M&A rapprochement between the two Connecticut industrial titans -- it was the first major sale of a unit from one to the other since GE tried to box out United Tech in a bid for Honeywell International Inc, which was ultimately quashed by regulators.

But United Tech doesn't expect a flurry of other unit sales to follow -- a merger of GE's jet engine business and United Tech's Pratt & Whitney unit, for example, is not in the cards.

"I don't think GE's going to sell their business to us, not that I could afford it, probably," Hayes said.

The U.S. government has pumped more than $100 billion into Detroit over the past year to keep automakers General Motors and Chrysler alive. But some of the sector's remaining capitalists are having a hard time stomaching a $25 billion Department of Energy loan program intended to spark new developments in electric cars. 

Start-ups Fisker Automotive and Tesla Motors have won about $1 billion in combined funding, while longtime players Ford and Nissan have received substantially larger loans from Washington to work on vehicle electrification -- a technology the White House and many in the industry hope will reduce the United States' dependence on imported oil and lower emissions of carbon dioxide, a leading greenhouse gas. 

Funneling federal money to new entrants to the automaking world does not sit right with Tim Leuliette, chief executive of parts supplier Dura Automotive. 

"If there's a real market for electric vehicles, the OEMs will do it," Leuliette said, using industry jargon for automakers. "We don't need to have people who have never built a car in their life take $1 billion of our tax money and say 'I can do it too.'" 

Government funding muddles market signals, Leuliette argued at the Reuters Autos Summit in Detroit.

"When government writes a check, it says the smart money investors are hesitant to fund it," Leuliette said. "When markets say it's now wise enough ... there's more than enough money." 

For his part, the founder of Fisker Automotive -- which aims to build plug-in hybrid cars at a former GM plant in Wilmington, Delaware -- said government funding is a logical way to kick start a technology that private U.S. companies have been slow to focus on. 

"Do we just sit and wait for the Chinese and the Japanese or Europeans to develop this and then we join later? Or do we actually this time around, try to take the lead?" said Henrik Fisker, whose plug-in hybrids would be able to travel for short distances on just the electricity stored in their batteries, which can be charged off the electric grid. 

"This is a moment in time, we cannot let this pass. We already let the hybrid pass - Toyota in the consumer's mind, invented the hybrid and owns the hybrid - the average consumer doesn't know that GM has more hybrids than Toyota," Fisker said. "If an American company comes first with a plug-in hybrid, and we will be followed closely by the Chevy Volt in another segment, I think that is where America then has a chance in the consumer's mind to take the lead, and not only in the U.S., but worldwide."

Ed Whitacre sneaks off to breakfast at a Detroit greasy spoon. Sergio Marchionne's attention to detail extends to the condition of his factories' bathrooms. And Bill Ford helped save his great-grandfather's company by hocking the blue oval. 

These are just a few of the glimmers of top Detroit auto executives' lives that you get when you sit down with Ron Gettelfinger, head of the United Auto Workers union. 

Marchionne, the chief executive of Italian automaker Fiat -- which pulled Chrysler out of bankruptcy this year, seems to be "extremely respectful" of his workforce, Gettelfinger told the Reuters Autos Summit in Detroit on Tuesday. 

"I know he's went out into the facilities and one of the things that he did was walk into the restroom to inspect it. Now you don't normally see that happen," Gettelfinger said. "But he truly believes in the power of the people, the value they add to the process." 

General Motors chairman Whitacre is also a fan of unannounced factory visits, a detail Gettelfinger may have picked up at one of their morning meetings. 

"There's a little dive up the street that we go up here and have breakfast sometimes," Gettelfinger said. 

He also recalled a call that came from then-Ford CEO Bill Ford three years ago, when the automaker was preparing a major debt offer -- a move that helped it to be the only U.S. automaker to avoid bankruptcy this year. 

"I remember him very well calling me to say, 'In case you hear anything, we think now is the time to go out into the market and build up some debt.' And the term he used was 'hock the blue oval,'" Gettelfinger recalled. 

That move, while painful at the time, was likely a major reason the company did not have to turn to Washington for a bailout as rivals GM and Chrysler did, Gettelfinger said.

"Ford went out and did it the hard way," Gettelfinger said. "And I think that has resonated with the buying public."

After a year of unprecedented turmoil in the auto industry, BMW's U.S. head smells blood in the water.

Changes in ownership at some of its historic European rivals may present the German luxury automaker with a chance to grab market share. 

But even as Jim O'Donnell saw weaknesses to exploit, he raised the worry that one of Detroit's most storied car brands, Cadillac, could take out of the market of the company that calls its vehicles "the ultimate driving machine." 

As Cadillac's parent company, General Motors Corp, went through a bankruptcy that forced it to cut thousands of jobs and shed brands, BMW picked up Cadillac customers and dealers. But a slimmed down GM could present a renewed threat, said the president of BMW's North American unit. 

"Going forward, I actually see Cadillac as one that could be potentially a serious rival," O'Donnell told the Reuters Autos Summit in Detroit. "Now that GM is only going to concentrate on four brands, if I was at GM, I would concentrate on Cadillac and really try and reestablish it. But if you look at the last year, and no wonder because of the turmoil in the marketplace, has been losing sales quicker than the market."

Even as he sees a renewed threat from Detroit, O'Donnell said he thought European rivals could become more vulnerable. BMW sees a chance to snatch customers from Saab -- which GM aims to sell to Swedish luxury car maker Koenigsegg -- and Volvo -- which Ford is negotiation to sell to Chinese automaker Geely. 

"Where are all the Saab customers going to go? And there's a great deal of uncertainty over Volvo. Where are all the Volvo customers going to go? Even though they've done well these last three months, I still think as they come under the ownership of Geely, will they have the same believe in the brand? I don't know," O'Donnell said. "But we will try to exploit it."

When General Motors rolled out its new "May the Best Car Win" ad campaign this fall, it turned its competitive fire on Toyota Motor Corp, rather than one of its Detroit competitors. 
Toyota, which last year displaced GM as the world's largest carmarker, takes the ads -- which compare the Chevy Malibu with the Toyota Camry -- as something of a compliment. 
"When Ford names Toyota and not Chevrolet and when Chevrolet names Toyota and not Ford, that speaks to some consumers about our position in the market," Toyota group vice president and general manager Bob Carter told the Reuters Autos Summit in Detroit. "So it's not all bad." 
But the Japanese automaker has no interest in getting drawn into an advertising tit-for-tat similar to Apple Inc's "Get a Mac" ads, which compare a young, hip actor representing a Macintosh computer with a dowdy middle aged actor playing a PC run by Microsoft's Windows operating system. 
"We think the most effective way to approach the market is to talk about our products and our brands," Carter said.

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Original Post Text:

- Scott Malone is a Reuters correspondent in Boston.-

Judging by the 52 percent run-up up in the Standard & Poor's home builders index over the past three months, investors have been eager to get their money back into the long-slumping U.S. housing sector.

Home buyers, not so much.

Finding that tax credits for first-time buyers and low mortgage interest rates are not enough to lure in buyers, Los Angeles-based KB Home this weekend will be tossing in another incentive: Come look at one of their model homes this weekend and get a free stuffed Disney character.

For those shoppers willing to make the jump from looking to buying (and financing through the company's mortgage arm) the company will throw in a room decorated in their (or their child's) favorite Disney theme.

Homebuilders in recent weeks have been sounding more confident that the three-year-long slump they have endured -- which kicked off the worst downturn the United States has seen since the Great Depression -- may be leveling off.

Lennar Corp chief executive Stuart Miller on Monday said the housing market was on the "road back to recovery," even as his company reported a deeper quarterly loss.

But some on Wall Street are raising concerns that investors are getting ahead of themselves in banking on a rebound.

"Some market observers are anticipating a faster recovery than we consider likely," wrote BGB Securities analyst Merrill Ross, in a note on the sector.

Investors will have another reality check on the turnaround on Friday, when KB Home reports quarterly results.

But those numbers will come a bit too soon to show whether Mickey Mouse was enough to lure potential buyers off the sidelines.

- Scott Malone is a Reuters correspondent in Boston.-

Judging by the 52 percent run-up up in the Standard & Poor's home builders index over the past three months, investors have been eager to get their money back into the long-slumping U.S. housing sector.

Home buyers, not so much.

Finding that tax credits for first-time buyers and low mortgage interest rates are not enough to lure in buyers, Los Angeles-based KB Home this weekend will be tossing in another incentive: Come look at one of their model homes this weekend and get a free stuffed Disney character.

For those shoppers willing to make the jump from looking to buying (and financing through the company's mortgage arm) the company will throw in a room decorated in their (or their child's) favorite Disney theme.

Homebuilders in recent weeks have been sounding more confident that the three-year-long slump they have endured -- which kicked off the worst downturn the United States has seen since the Great Depression -- may be leveling off.

Lennar Corp chief executive Stuart Miller on Monday said the housing market was on the "road back to recovery," even as his company reported a deeper quarterly loss.

But some on Wall Street are raising concerns that investors are getting ahead of themselves in banking on a rebound.

"Some market observers are anticipating a faster recovery than we consider likely," wrote BGB Securities analyst Merrill Ross, in a note on the sector.

Investors will have another reality check on the turnaround on Friday, when KB Home reports quarterly results.

But those numbers will come a bit too soon to show whether Mickey Mouse was enough to lure potential buyers off the sidelines.

The upcoming initial public offering of A123 Systems could help ease the way for more clean-tech stock offerings, one of the early investors in the battery maker said this week.
The company, which Chrysler has chosento produce lithium-ion batteries for its upcoming electric cars, set an IPO price range of $8 to $9.50 per share, which would raise up to $244 million, based on the 25.7 million shares it plans to sell.
"It will certainly be good for the sector just to get a real exit out there, both from a branding standpoint and from a  financing standpoint," said Jamie Kiggen, chief investment officer for clean tech ventures at Blackstone Group, who in his previous job at Alliance Bernstein was an early investor in the Watertown, Massachusetts-based battery maker.
"If the IPO window opens up, that helps all of us," Kiggen said at a Boston conference organized by the Cleantech Group.
A123 first filed its IPO plans with the U.S. Securities and Exchange Commission in August 2008. 
While the IPO market has picked up in recent months after a rough 2008, A123 would be the first U.S. clean tech company to go public since July 2008.

As they headed into 2009, chief executives at top U.S. manufacturers were licking their chops at the thought of the M&A bargains they would find in the midst of the worst recession since the Great Depression. The takeover feast they hoped for has not materialized, but the chief financial officer of 3M Co said on Wednesday he believes that may start to change.

"I honestly had anticipated that the M&A market was going to be a better market during this recessionary period. It really hasn't panned out that way," Patrick Campbell, CFO of the St. Paul, Minnesota-based company told an investor conference in New York. "A lot of companies were either holding their breath waiting for the recovery to happen or they were looking back to where their stock price was before. And honestly that's the price they wanted and we weren't ready to pay a price that was based on a previous peak."

Deal flow may start to pick up when the economy begins to turn and companies find themselves needing money quickly to respond to returning demand, Campbell said.
"Maybe it's yet to come," he said. "As volume comes back for many suppliers, many companies, this may actually be the stress point for them relative to their financing needs, as they need to fund working capital requirements and so forth ... This could actually be the point where maybe we start to see some companies that maybe become a little more distressed in the recovery phrase. We've got our eyes wide open on that."

Manitowoc Co is set to be the third U.S. manufacturer dropped from the Standard & Poor's 500 index this year -- but the brains behind the benchmark said the shift does not reflect a desire to soft-pedal the sector. 

"Our general concern about sectors is the proportions of sectors in the market and the index should be close to one another, and close is around a percentage point or so," said David Blitzer, an S&P managing director who chairs the index committee. "Given that the 500 is 75 to 80 percent of the total market cap of the U.S. market, we're never going to be too far off."

S&P said late on Monday that it would remove Manitowoc, a maker of cranes and ships, from the benchmark S&P 500 after the close of trading on Aug. 31, noting that its market capitalization ranked it last in the group.

Manitowoc will be replaced by Cardinal Health Inc spin-off, CareFusion Corp, a medical products company.

In March, Tyco International Ltd was dropped from the index, followed by Ingersoll-Rand Co in June. They were replaced by New England's largest utility Northeast Utilities and utilities contractor Quanta Services Inc.

But Tyco and Ingersoll had something in common besides their sector -- they both reincorporated from Bermuda to Europe, making them ineligible for inclusion on this list.

"Two of the three industrials that left did it themselves," Blitzer said.

Leaving the index -- whose members are widely held in a variety of mutual and index funds -- can take a toll on a stock's performance. Manitowoc shares were down 7 percent at $6.35 on Tuesday, on a day that U.S. stocks were mostly higher.

But that penalty has not deterred some companies' interest in making a move, in the face of concerns that the Obama adminsitration may crack down on incorporations in countries including Bermuda seen as an effort to avoid taxes.

Cooper Industries Ltd in June said it planned to reincorporate to Ireland, joining Ingersoll, saying that lower taxes and regulatory costs would help its bottom line.

But Blitzer laughed at the idea that S&P could even try to muscle any single sector out of its benchmark index.

"I don't think that we could do it, not that we've ever tried," be said. "It just wouldn't work."